The BBC's Jamie Robertson"The OPEC cartel of oil producing nations is likely to vote on a cut in production" real 56k

Friday, 13 July, 2001, 13:42 GMT 14:42 UK

Oil boss brands Opec 'greedy'

By BBC News Online's Stefan Armbruster

The head of one of Russia's largest oil companies has blamed the Organisation of Petroleum Exporting Countries (Opec) for creating volatility in oil prices.

Opec has been accused by the EU and the US of being greedy when it cut production to raise the cost of oil - but it is unusual for the head of a major oil company to call for a price cut.

But Mikhail Khodorkovsky, chairman and chief executive of Yukos, makes the claim with an air of confidence ahead of the company's first-quarter results next week.

Khodorkovsky: "some people got greedy"

"I am not for high oil prices. I would prefer a lower but more stable market," Mr Khodorkovsky told BBC News Online.

Yukos, like most oil companies, has made extraordinary profits from Opec production cuts, which have pushed oil prices to record highs.

Oil is currently trading at about $25 a barrel, which is within Opec's preferred $22-28 price range.

"I feel the normal price is $21 to $22 for a barrel of Brent [crude oil]," he said.

Oily profits

Stability is the word that recurs in what Mr Khodorkovsky says and it is the desire to achieve this for his company that prompts the criticism of Opec.

"A year ago a congress of producers and consumers of oil was held in Paris. You had the chairmen of Opec and the International Energy agency present. And everybody was unanimous that what the energy market needs is less volatility," he recalled.

I am not for high oil prices. I would prefer a lower but more stable market

Mikhail KhodorkovskyYukos

"Everybody agreed the market should fluctuate in the range of $16 to $25 for a barrel of Brent and that the optimal price is $21 to $22. Unfortunately after that meeting some people got greedy."

Late last year, Opec cuts pushed the cost of a barrel of Brent oil to just under $36 - and average price of $28.5 for the year - dramatically higher than in 1999 when a barrel had traded at under $10.

Mr Khodorkovsky concedes that the high oil price has not done his company's bottom line too much harm.

Last month Yukos reported it had tripled profits in 2000 to $3.2bn and the company's shares, which sailed through this year's stock market turbulence, hit and have stayed near their all-time high.

These figures represent a dramatic turnaround from two years ago when Yukos was in the red.

Investor fears

Yukos is one of the Russian companies have to emerged with its power intact from the scramble for economic and political power following the collapse of the Soviet state in the 1990s.

But Western investors are reluctant to pump more money into the country after they had their fingers burnt by financial scandals and the collapse of the rouble.

Yeltsin meets business leaders including Khodorkovsky (far right)

Media allegations of corruption and "mafia" activities, from which Mr Khodorkovsky has not been immune, have also fuelled Western scepticism about Russian companies.

"The West still knows so little about Russia. I have the feeling the location of the Kremlin is still a mystery to most so it is no surprise to me that Russian businessmen evoke ambiguous feelings," counters Mr Khodorkovsky.

Russian reformation

However, Yukos is regarded as one of the few Russian companies with which the West can reliably do business.

Reform of the company began in 1999. It coincided with the handover of power in the Kremlin from Boris Yeltsin, who presided over the worst excess of the post-Soviet years, to Vladimir Putin in the same year.

This reform has produced concrete results.

When it reports its first quarterly results, it will be the first major Russian oil company to have successfully adopted the US GAAP accounting standard.

"The first thing we have done is to show that the company is stable and that there is good corporate governance," Mr Khodorkovsky said.

Many of these reforms have been facilitated by the new president's approach to business and changes in the law, particularly the tax law.

"There is now a proper legislative framework and here Russian oil companies have been working closely with the Russian government....The situation is evolving most positively," he added.

"For Yeltsin we were children about whom he was concerned, whom he ensured were not hurt in any way but to whom he had a patronising attitude," Mr Khodorkovsky said. "Putin's attitude is different. He sees us a partners in the realm of economics".

Though not all of President Putin's policies are well received by Mr Khodorkovsky.

While he supports the President's reforms of state-owned Gazprom, the world's largest gas producer, moves to censor a critical domestic media have not been as well received.